Recovering employment entitlements; Federal Circuit Court

In a very surprising decision, a judge of the Federal Circuit Court has held that the Court does have jurisdiction when exercising its small claims jurisdiction to hear and determine a claim by an employee or former employee for payment of a denied contractual benefit in the absence of an award entitlement to the benefit. The case concerned a claim for non-payment of a commission payable under a provision of a contract of employment.

The decision is particularly a surprise because if it is correct, it means with the greatest respect that such a claim may be pursued in the Federal Circuit Court in its small claims jurisdiction, where claims must be capped at $20,000 but not in its General Federal Law jurisdiction.

Here is Her Honour’s reasoning.

“Jurisdiction

The court’s jurisdiction in this matter is subject to the provisions of the FW Act and the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCCA Act”).

Section 10 of the FCCA Act relevantly provides:

The Federal Circuit Court of Australia has such jurisdiction as is vested in it by laws made by the Parliament:

(a)          by express provision; or

(b)          by the application of section 15C of the Acts Interpretation Act 1901 to a provision that, whether expressly or by implication, authorises a civil proceeding to be instituted in the Federal Circuit Court of Australia in relation to a matter.

Section 566 of the FW Act relevantly provides that this court has jurisdiction in relation to any civil matter arising under that Act.

In addition, section 548 of the FW Act sets out the types of matters which may be dealt with in the court’s small claims jurisdiction. Relevantly, section 458(1A) provides that for a matter to be dealt with in the small claims jurisdiction, it must relate to:

(a)          an amount that an employer was required to pay to, or on behalf of an employer:

(i)           under this Act or a fair work instrument; or

(ii)          because of a safety net contractual entitlement; or

(iii)         because of an entitlement of the employee arising under subsection 542(1);

(b)          …

The respondent argues that the applicant’s claim, such as it is, arises from a contractual arrangement between the applicant and the respondent and therefore does not fall within any of the requirements of section 458(1A) and the court does not have the power to deal with it.

The applicant did not identify any provision under the Act or a fair work instrument under which he says he is entitled to the commission claimed. A ‘fair work instrument’ is defined in section 12 of the FW Act to mean:

(a)          a modern award; or

(b)          an enterprise agreement; or

(c)          a workplace determination; or

(d)          an FWC order.

In his application, the applicant makes reference to a ‘workplace determination’. However, the term ‘workplace determination’ is defined in section 12 of the FW Act to mean:

(a)          a low-paid workplace determination; or

(b)          an industrial action related workplace determination; or

(c)          a bargaining related workplace determination.

There is no evidence before this court that any such instrument applied to the applicant’s employment.  The applicant has not established that his employment and any commission entitlement arose under a ‘workplace determination’ as defined.

The question does arise however, as to whether the applicant’s entitlement to a commission payment arises because of a ‘safety net contractual entitlement’.  A ‘safety net contractual entitlement’ is defined to mean:

an entitlement under a contract between an employee and an employer that relates to any of the subject matters described in:

(a)          subsection 61(2) … or

(b)          subsection 139(1) …[5]

[5] Fair Work Act 2009 (Cth), section 12.

The matters described in section 61(2) are not relevant; however, the matters described in section 139(1) include ‘incentive based payments’. That term is not defined in the FW Act.

It is nevertheless arguable that it includes a commission structure which is intended to encourage sales representatives to maximise sales.  The Macquarie Dictionary defines the term ‘incentive’ in the following terms:

  1. that which incites or stimulates action.
  2. an inducement such as extra money, better conditions, etc. offered to employees to encourage better work

Similarly, the Oxford English Dictionary defines the term to mean, among other things:

  1. of or pertaining to a system of payments, concessions, etc. to encourage harder work or a particular choice of work.

It is common ground that it was a term of the applicant’s employment that he was entitled to an annual base salary and, in addition to that, he was entitled to a commission scheme in accordance with the ‘standard LMH commission structure.’[6]  It is also common ground that the terms of the commission structure changed from time to time over the course of the applicant’s employment.

[6] Exhibit A.

The relevant terms of the commission structure which applied to the applicant’s employment are contained in Exhibit B.  It is common ground that the applicant was paid pursuant to the 2014 commission policy.[7]  Relevantly, the policy document refers to the commission structure as an ‘incentive commission’ and says ‘an incentive commission can be claimed on a quarterly basis by all ADMs who exceed respective quarterly order intake budget as measured by calendar quarter.’[8]

[7] Exhibit B.

[8] Exhibit B, page 2.

I am satisfied that the commission structure which applied to the applicant’s employment could properly be described as an entitlement that relates to an incentive based payment and as such, a contractual term dealing with that matter falls within the term.

The question therefore arises as to whether or not the applicant’s entitlement to a commission payment falls within the notion of an ‘incentive based payment’ and would fall within the definition of a safety net contractual entitlement for the purposes of the definition of that term in section 12 of the FW Act.

It was submitted on behalf of the respondent that as the commission structure does not arise under an award or other industrial instrument but rather solely arises from the contract between the parties, this is not a matter in respect of which this court has jurisdiction.  The respondent referred to the decision in Girardi v Allergan Australia Pty Ltd [2017] FCCA 163 (“Girardi”).

In Girardi, the court concluded that although section 139(1)(a)(ii) refers to incentive based payments and bonuses:

(the section) does not assist (the applicant) … the effect of that section is to permit a modern award to include terms about those matters… the relevant Award does not include terms about incentive based payment or bonuses.

The SIP in question was an extra term of his employment conditions, which did not arise because of any term of the Award or by virtue of the FW Act. It was… part of a common law contract between the applicant and the respondent that operated in tandem with the Award.[9]

[9] Girardi v Allergan Australia Pty Ltd [2017] FCCA 163 at [14]-[15].

I am not bound by the decision in Girardi.  Moreover, I take a different view of the effect of the definition of ‘safety net contractual entitlement’ in section 12. A matter will fall within that definition if it is:

  1. a)           an entitlement;
  2. b)           under a contract between the employer and employee;
  3. c)           relating to any of the subject matters identified in section 139(1).

In this case, it is conceded that the applicant:

  1. a)           had an entitlement to a an incentive commission; and
  2. b)           that entitlement arose under his contract with the respondent.

For the reasons set out above, I find that the said entitlement relates to an incentive based payment, for the purposes of section 139(1).

It is not necessary that an applicable award relevant to the applicant contains a provision for an incentive based payment. Indeed, if the award itself would need to contain such a provision, section 548(1A)(ii) would have no work to do. A breach of such a clause could be the subject of a small claims proceeding by virtue of section 548(1A)(i) as it would be a breach of a fair work instrument.

I therefore find that the court does have jurisdiction to deal with this claim.”

 

CAMPBELL v LINDE MATERIAL HANDLING PTY LTD [2019] FCCA 2023 delivered 2 August 2019 per Mercuri J